Capitol Riverfront scene. Photo credit: Capitol Riverfront BID.

WASHINGTON, DC–President Trump submitted his budget proposal for FY 2018 to Congress yesterday and as expected it contained severe cuts at many civilian agencies. It also called for a bump up in defense spending. By now we know how the story line plays out: Northern Virginia wins and the District, particularly the Southwest quadrant where many of these government agencies are located, loses. Loses bigly, one might say.

But in its first analytical pass at the proposed budget JLL makes an interesting observation:

Cuts to headquarter functions in Southwest could be a long-term benefit to real estate owners there as Mall-centric locations (such as recent disposition of Cotton Annex) could be disposed by GSA for private use. Consider this, there is a 54% rent premium for office product at the Wharf to other Southwest office product.

And as for the widespread assumption that Northern Virginia will come out ahead, JLL had this to offer:

The administration calls for cuts to non-mission critical functions and specifically calls out IT. In FY 2016, technology contracts represented 41% of overall contracts. Should IT budgets be cut, any growth of mission-critical contractors could be equally negated by technology-focused contractors and thus why, to date, contractor leasing activity in Northern VA has been very quiet despite increased investor demand and activity.

These are early days for the president's budget proposal. It must be approved by Congress and only twenty-four hours in there are signs of significant resistance among both parties.

No Budget At All?

Might Congress not pass a budget at all, JLL speculates? It is possible and certainly there is precedent for that. For office owners, that would mean a reversion back to the days of trying to make sense of local supply and demand without a long-term roadmap from the feds.

But if no budget is passed, Washington DC would avoid the worst of the painful cuts, JLL concluded. And as an added bonus, there would be a good chance that the Trump Administration would still pursue certain initiatives anyway — only separately through the National Defense Authorization Act.

But in its first analytical pass at the proposed budget JLL makes an interesting observation:

Cuts to headquarter functions in Southwest could be a long-term benefit to real estate owners there as Mall-centric locations (such as recent disposition of Cotton Annex) could be disposed by GSA for private use. Consider this, there is a 54% rent premium for office product at the Wharf to other Southwest office product.

And as for the widespread assumption that Northern Virginia will come out ahead, JLL had this to offer:

The administration calls for cuts to non-mission critical functions and specifically calls out IT. In FY 2016, technology contracts represented 41% of overall contracts. Should IT budgets be cut, any growth of mission-critical contractors could be equally negated by technology-focused contractors and thus why, to date, contractor leasing activity in Northern VA has been very quiet despite increased investor demand and activity.

These are early days for the president's budget proposal. It must be approved by Congress and only twenty-four hours in there are signs of significant resistance among both parties.

No Budget At All?

Instant Insights /

Southwest DC: A Long-Term Winner Under Trump?

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